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Report business or rental portions of a home sale on Form 4797

For some property sales, you don't have to allocate the basis of the property and the amount realized between the business and home portion. This is the case when:
  • The business or rental part is in the home. Examples include in-home offices or rented rooms.
  • The business or rental part is separate from the home, but wasn't used for business or rental during the year it sold.
If you meet 1 of these conditions, you don't report the business and rental portion on Form 4797. Report the entire gain on Schedule D. Enter all of the sale information in the
Home
 screen in the
Personal Sale
 folder. You don't have to enter anything in the
Sale
 screen.
If you don't meet any of these conditions, the sale reports on Form 4797.
  1. Be sure the business or rental portion qualifies for the section 121 exclusion.
  2. Divide the maximum exclusion between the business and personal portions of the sale.
  3. Go to the
    Home
     screen in the
    Personal Sale
     folder. Enter the home portion in the
    Maximum Exclusion Amount Force
     field. Enter only the sale of the home portion.
  4. On the
    Sale
     screen in the
    Personal Sale
     folder, complete the business or rental amounts for the following:
    • Selling price
    • Selling expenses
    • Basis
  5. Enter
    3
     in the
    Treatment
     field to report the sale on Form 4797 Part III.
    • Don't enter
      X
       in the
      Section 1250 property
       field unless all of the depreciation was after May 6, 1997.
    • Don't take any exclusions into account.
  6. Go to the
    Sale
     screen and add a new unit. Use
    Section 121 exclusion
     for the description.
  7. Enter
    1
     in the
    Treatment
     field to report on Part 1 of the 4797.
  8. Enter the date of sale in the
    Date sold
     field.
  9. Enter the amount of exclusion that applies to the business or rental portion in the
    Cost or other basis
     field.
  10. If there is gain reported because of depreciation for periods after May 6, 1997, adjust line 3 of the Unrecaptured Section 1250 Worksheet by this amount. You can replace the amount on the form to make the adjustment.

This article applies to:

  • Product: UltraTax CS
  • Return type: 1040 Individual
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